Top Tips for Paying Off Credit Card Debt

It seems so easy to become trapped in credit card debt with everything going on in the world these days.

It also may seem even more difficult to rid yourself of that debt.

If you are finding yourself in this position, here are some ideas about how you can handle paying off your credit card debt altogether.

These are practical tips that most everyone can implement.

Let’s get started.

Write Down Your Goals

Take some time to sit down and actually write down goals.

It is shown that written goals and reviewing them regularly will prove to be a motivating factor toward achieving them.

It may be a bit depressing, but list everything you owe.

That will include credit cards, mortgages, car loans, lines of credit, and overdraft fees.

There are some online programs that will help if you need them.

Stop Using Your Credit Cards

Don’t use credit cards.

Physically remove them from your wallet or purse.

This will help stop impulse buying or recognizing necessities from “wants”.

Pay for purchases in cash only.

This can help you realize areas where you can economize and help you focus on the goals of reducing your debt.

Prioritize Your Wants and Needs

List everything you owe.

Perhaps you have already done that when you set your goals.

If not, record everything including their balances, interest rates, and fees.

Note any benefits like cash back amounts.

Next, arrange them in order of importance.

Rent/mortgage payments and car loans will probably be at the top of the list.

That is because they are necessary for you to have shelter and transportation.

The rest of the list you may want to rearrange.

Some people want to tackle the smallest balances and just get rid of them.

Other folks are interested in getting rid of the cards with the highest interest rates.

Whatever your priorities are (and these may change), put them in order and keep that with your list of goals.

As you eliminate one of those cards, cross it off your list as an incentive to keep at it.

Look at Your Expenses Carefully

For at least two weeks, write down every penny you spend.

Include that fancy coffee; the post-work beer after a long, hard week; the candy bar from the vending machine; groceries; fuel; utilities; pretty much everything.

This will help you understand where the money is being spent.

Then you can look at ways you can economize.

No a home brewed instant coffee in the microwave is not nearly as tasty as that double shot latte, but look at the cost savings.

Another surprising expense is eating at fast food places instead of cooking.

Are you not an expert in the kitchen?

Strike some type of a deal with a neighbour to swap chores for cooking, to learn, or  to share meals.

Eat leftovers.

Be creative.

Buy generic or store brands; compare prices not just the total but the unit pricing to see what is the best deal.

Some grocery stores reduce the price of meats on the sell-by date.

Another thought is to only shop once per week.

That will save on impulse buying and insure that you only spend what you have allocated.

There are even more ways to save.

Research some other ways to save money.

There are a number of sites that can be very insightful and have resources and plans to follow.

Plan Your Spending Wisely

There are sites that provide an interactive and easy spreadsheet to calculate what you have to spend.

There are also low tech options like a paper and pencil and it is called a budget.

Include holiday expenses as well as those birthday gifts.

For close family and friends, you can explain that you are tight on money, but give them your time and energy instead.

Redeemable coupons can be fun to exchange instead of just another dust catcher.

Reduce the number of cable channels to a lower or even a basic package.

Check Interest Rates

A popular method is to implement this strategy.

After paying the fixed amounts like rent, vehicle loans, and insurance, make at least minimum payments on the credit cards.

After this look at any extra money and apply it to the balance of a credit card account that has the lowest interest rates.

Once a card is paid off, start paying down the balance on the card with the next highest rate.

Call the credit card people and see if they will reduce the interest rate for a year, or even six months.

This little bit of extra savings can mean you pay down the bill sooner and can move into a more secure financial situation.

Check Balances

Another tactic is to pay off the credit cards with the lowest balances first.

This makes people feel in control because progress is visible.

• Don’t be concerned with the interest rate; just look at the smallest balance.  Put any extra money toward paying it off.
• After that one is taken care of, use the money you would have allocated to XYZ credit card toward the next lowest balance.
• Repeat.

Analyze and Act

For some people one or the other of these methods works better.

If the first one does not leave you feeling motivated, switch techniques.

You need to maintain momentum to be successful.

End the Card

Once the credit card is paid in full, cut it up or shred it and cancel the account.

Be sure to tell the customer service representative to take your name off all future offers.

Most people survive on only one or two credit cards.

Use Reserves

Consider tapping into your savings account.

Try to put some money aside for emergency expenses, but if you are saving just for the sake of saving, use some of it for paying down bills.

Most savings accounts interest rates are significantly lower than the interest you are paying on the credit card.

You can also think about holding off those extra payments into Canada Savings Bonds until you are on better footing.

Balance Transfer

If you can qualify for a credit card with a significantly lower interest rate, see if they can arrange to transfer a balance from another card.

This can save money on interest charges over time.

Just be sure to understand how long that lower, “introductory” rate is valid and any penalties or fees involved in the transfer.

Debt Consolidation Loan

Working through a licensed counsellor, you can secure a debt consolidation loan that will pay off the credit cards in one swoop.

Then you only have a single monthly payment instead of multiple checks to write.

If you opt for this, be sure to select a reputable firm and understand all the terms and conditions.

Also, at that point destroy your existing credit cards.

This will prevent you from using them and getting yourself back into the same pickle you just got out of.

Refinance the Mortgage

If you own your home, you can check to see if you have enough equity to consolidate your debts into a new, or second, mortgage.

Before you take action, try talking with an independent counsellor about this option.

You will need to review all of the interest charges as well as the fees for the refinancing, possible inspections, additional mortgage insurance rates.

Outside of banks and credit unions, there are companies called home equity lenders.

These are not always the best choice and can create more problems.

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